Used car prices fall again in July, almost 20% below pandemic highs [Video]

Vehicle prices continued their downward trend in July – the most of any major category in the Consumer Price Index (CPI) in the last year, as the auto market continues its return to “normal” after pandemic-fueled inflation.

Used car prices fell 2.3 percent in July from the previous month and 10.9 percent from a year earlier, BLS data showed Wednesday. New car prices fell 0.2 percent in July and 1.4 percent from a year earlier.

Compared to their peak in February 2022, used car prices are now down 19.4%. Used car prices rose more than 40% annually in both June and July 2021 and again in January and February 2022. Used car and truck prices are still 16.9% higher than they were in July 2019.

In July, the headline CPI rose 0.2% month-on-month and 2.9% year-on-year, a slight slowdown from the 3% annual price increase in June and also exceeded economists' expectations of an annual increase of 3%.

The continued downward pressure on the used and new car market is due to rising inventory levels, which are leading to lower prices, especially for used cars.

Read more:Can you buy a car with a credit card?

“These trends in the used car market directly reflect dynamics in the new car market as inventory levels normalize,” auto research firm Edmunds said in its second-quarter vehicle pricing report. “A buildup of new cars on the lot over the past year has been the catalyst for discounts and incentives for aging inventory. While these new car prices are trending downward, values ​​of newer used cars have declined accordingly.”

A return to normality in auto prices is a welcome change for buyers, even if it may put some pressure on dealers. But despite falling prices and rising inventories, automakers like Ford (F), GM (GM) and Toyota (TM) have still seen strong sales at the dealer level. GM in particular expects only a modest decline in the average transaction price.

There's good news for used car dealers: The Manheim Used Car Value Index (MUVVI) rose slightly in July compared to June, indicating higher demand for used cars. The MUVVI tracks prices paid by dealers at the wholesale level, and price movements here generally trickle down to the consumer market.

Manheim analysts believe that a smaller number of leased vehicles in the used car market could drive prices higher. The question is: is this just a blip or a sustained upward trend in used car prices?

Pras Subramanian is a reporter at Yahoo Finance. You can follow him on Þjórsárdalur and further Instagram.

Click here for a detailed analysis of the latest stock market news and events that move stock prices

Read the latest financial and business news from Yahoo Finance